The EU and UK are both taking steps designed to safeguard the supply of critical raw materials. These include rare earths, which are essential for products that support the green energy transition, such as batteries and the magnets in wind turbines.
What's the EU doing about critical raw materials?
The European Commission has released a draft of the 'Critical Raw Materials Act' ("CRMA"). The purpose of the CRMA is to ensure that the EU maintains access to a resilient and sustainable supply of critical and/or strategic raw materials.
New due diligence obligations
Among other things, the CRMA provides for the monitoring of critical raw material supply chains and will require certain large companies to audit their supply chains. Interestingly, however, these audit requirements are less onerous than other recently implemented, and proposed, EU due diligence regulations. In particular, the CRMA only requires large companies to carry out an internal audit mapping their supply chain, assess vulnerabilities of their supply chain, and report the same to the board of the company. This is in contrast to the more onerous due diligence requirements within the EU Deforestation and Batteries Regulations.
The EU Deforestation Regulation requires third-party verification and auditing of due diligence processes and oversight by "top level management". The Batteries Regulation goes even further, requiring a fulsome diligence assessment pinpointing the exact geolocation of the plots of land where commodities were produced, details of the operator's upstream suppliers and downstream customers and reporting on request to relevant competent authorities. These due diligence obligations are part of an ongoing extension of due diligence obligations across the EU, which include a Draft Regulation on Products Made with Forced Labour, and the anticipated Corporate Sustainability Due Diligence Directive ("CS3D") (see our briefing). The anticipated impact of these developments should not be underestimated, with companies around the world pulled in either directly or as part of an in-scope company's wider value chain.
What else does the CRMA do?
Additionally, the CRMA would introduce a suite of EU-wide objectives designed to boost the resilience and circular economy credentials of the EU's supply chain. These measures include easier access to finance, significantly shorter permitting times for 'Strategic Projects' (which are projects that further the objectives of the CRMA) and an initiative to create an international Critical Raw Materials Club to act as a nexus for strategic third country partnerships. For more information, see our briefing on the CRMA.
What's the UK doing about critical raw materials?
In July 2022, the UK Government published its own Critical Minerals Strategy, which includes a framework for accelerating the UK's domestic production of critical materials. The framework includes provisions helping to categorise what materials are considered to be critical in the UK, signposting Governmental financial support, reducing barriers to domestic exploration and extraction of materials, and increasing foreign direct investment into the UK's minerals sector. It is yet to be seen whether the UK Government will enshrine this strategy in law through the implementation of new legislation.
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